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Hundreds of independent and art house theaters are protesting Sean Parker and Prem Akkaraju’s controversial new plan to make new movies available in the home for $50 on the same day they hit theaters via an encrypted set-top box costing $150.
In an open letter to the Screening Room, the Art House Convergence — representing 600 cinema owners — said the proposed model is “incongruous with the movie exhibition sector by devaluing the in-theater experience and enabling increased piracy. Furthermore, we seriously question the economics of the proposed revenue-sharing model.”
The position of the Art House Convergence is significant because many of its members are hardly averse to day-and-day VOD or early premium VOD releases. “We are not debating the day-and-date aspect of this model, nor are we arguing for the decrease in home entertainment availability for customers — most independent theaters already play alongside VOD and Premium VOD, and as exhibitors, we are acutely aware of patrons who stay home to watch films instead of coming out to our theaters,” the letter continued.
The organization, of which Alamo Drafthouse founder Tim League is a leading member, said if studios and larger theater owners agree to the plan, “we will see a wildfire spread of pirated content, and consequently, a decline in overall film profitability through the cannibalization of theatrical revenue. The theatrical experience is unique and beneficial to maximizing profit for films. A theatrical release contributes to healthy ancillary revenue generation and thus cinema grosses must be protected from the potential erosion effect of piracy.”
Parker — the founder of Napster who later played a key role in Facebook’s rise — and Akkaraju hope to entice exhibitors by sharing revenue, and giving them $20 for every $50 spent by a consumer renting a title for a 48-hour window. They also contend they will focus on consumers who don’t go to the movies. Parker and Akkaraju’s push comes at a time when serious discussions are going on between studios and theater owners about how to shorten windows without jeopardizing the box office; however, a $50 day-and-date rental service may not be the solution.
“There are many unanswered questions as to how this business model will actually work,” said the Art House Convergence. “The proposed model, as we have read in countless articles, suggests exhibitors will receive $20 for each film purchased. At first glance, an exhibitor may think it represents a small, but potentially steady, additional revenue stream. But how will this actually be divided among the number of theaters playing the purchased title; will exhibitors who open the title receive more than an exhibitor who does not get the title until several weeks later (based on a distributor’s decision); who will audit the revenue to ensure exhibitors are being paid fairly; does this revenue come from Screening Room or from the distributor … these are just a few of the issues yet to be explained,” said the group, founded in 2006 as an umbrella organization for independent and art house cinemas.
Major theater circuits Cinemark and Regal Entertainment aren’t expected to partner with the Screening Room, while AMC Entertainment has singed a letter of intent at the behest of its parent company, China’s Dailian Wanda Group, according to sources. Hollywood studios could be reluctant to license their films unless a majority of the bigger circuits go along, even as a raft of top filmmakers, including J.J. Abrams and Peter Jackson, support the Screening Room, saying it will be beneficial to cinema operators. Whether their support wanes in the wake of the outcry from exhibitors remains to be seen.
So far, the National Association of Theatre Owners hasn’t weighed in, but is presently discussing the issue with its members.
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